RBI policy review rate deduction; home, auto loans to cost less

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NEW DELHI: On the occasion of upcoming Diwali festival, Governor Urjit Patel-led panel begins policy review on Tuesday with the markets rate deduction by 0.25 per cent, lowering borrowing cost for prosperity to home, auto and corporate loans borrowers to 6-year low.

The 6-members Monetary Policy Committee have taken interest rate decision , in which three members were nominated by the government and the three members from the Reserve Bank, lowered repo rate to 6.25 per cent from 6.50 per cent.

According to the Finance Ministry, it will assist in getting 8 per cent growth and expressed confidence that banks will effectively pass on the benefits to borrowers.

First in six months, today’s cut came amidst big clamour for normal rates especially after the departure of former Governor Raghuram Rajan, who was often accused by some sections, including those from the ruling BJP, of stifling growth by keeping rates too high.
The repo rate, at which RBI lends to banks, was 6.25 per cent in November 2010. It peaked to 8.5 per cent in October 2011.

Patel said, “The Government has declared several measures to cool food inflation pressures, especially with regard to pulses. These measures should help in moderating the momentum of food inflation in the months ahead. This has opened up space for policy action.”

Following the rate deduction, the BSE benchmark Sensex closed 91 points up at 28,334.55.
Finance Secretary Ashok Lavasa said the RBI policy will boost liquidity in the system and the central bank as well as the government are in sync with the inflation target.
“Welcome rate cut by RBI. Expect Banks to follow it up with effective transmission of rates. Rate cut net positive for economy,” Economic Affairs Secretary Shaktikanta Das said.

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